Bryan Caplan argues that social conservatives should prefer libertines to hypocrites, contrary to the common meme that “at least hypocrites have moral standards.” The argument is pretty simple: hypocrites seem to share your values, but when you least expect it, they will betray you. So far as it goes, the argument is pretty convincing.

But libertines and hypocrites aren’t the only two possible types of people who fail to live up to putative moral standards. A true hypocrite doesn’t actually have moral standards but merely pretends to them. After all, if one has moral standards, they should affect your behavior appreciably, but the hypocrite simply does what (s)he wants anyway while feigning belief in a stricter standard. That’s what makes hypocrites so dangerous.

The third type of moral failure is weakness of will. The weak-willed believe in moral standards and generally live up to them, but occasionally fail due to weakness of will. The weak of will acknowledge their flaws and try to do better, but you know they will sometimes fail. Unlike the hypocrite, the weak-willed is open about his/her failings, and therefore when dealing with them you know better what you’re dealing with. Unlike the libertine, the weak-willed often actually do live up to moral standards, so long as it isn’t too hard to do so.

Therefore, social conservatives should rank moral failures thus: 1) weakness of will, 2) libertinism, 3) hypocrisy. What some social conservatives praise when they praise “hypocrisy” is probably actually weakness of will, if they took some time to reflect on the distinctions.

Does this fraud evince hypocrisy or weakness of will? After all, Podemos has taken the lead in denouncing corruption in other parties, whom they call “la casta.” Withholding taxes from the government has to be a cardinal sin for socialists. Can true-believing socialists excuse the act on the grounds that “at least he has principles”? Or is he really pretending at having socialist principles at all?

It’s difficult to answer this question, because socialism attracts the unprincipled. If you want to enrich yourself through government, there’s no better way to do it than to denounce corruption and promote populist measures against the rich in order to get elected, and then once elected, use state-controlled companies to feather your own nest. When the state controls the economy, it controls wealth, and it will be extremely tempting to funnel some of that wealth to yourself and your friends.

Not knowing more about the man, it’s difficult to know whether Monedero – and quite possibly the other leaders of Podemos – are hypocrites or merely weak-willed. But that fact alone shows one of the inherent problems of socialism: really existing socialism either brings about rule by the already corrupt or corrupts those who rule.

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There has been much coverage of last week’s Supreme Court decision on campaign finance (McCutcheon v. Federal Election Commission), most of it negative (insert shocked surprise here) given that it will provide more opportunities for the wealthy to shape public policy. As Senator Tammy Baldwin (D-WI) observes:

“It is far too often the case in Washington that powerful corporate interests, the wealthy, and the well-connected get to write the rules and now the Supreme Court has given them more power to rule the ballot box by creating an uneven playing field where big money matters more than the voice of ordinary citizens.”

Perhaps one should not be too quick to fault the “powerful corporate interests, the wealthy, and the well-connected.” They are only being rational. They clearly understand that there are largely two ways to thrive economically: (1) produce more of the things that people value or (2) seek a variety of policy-related privileges that allow you to lay claim to what others have produced and/or create impediments to what your competitors might produce. Over time, the second of these paths—rent-seeking or transfer-seeking has grown in importance in shaping economic outcomes. It is effective, often invisible, and the costs are borne by taxpayers and consumers. As long the elected officials of both parties are in the business of selling privileges, there will be buyers. The rent seeking society will thrive, even as it throttles growth and economic dynamism and contributes to our long-term fiscal problems.

One should not be surprised that the critique of the McCutcheon decision has begun to merge with the attack on the Koch brothers. This morning, a Google search for “McCutcheon and Koch” generates 364,000 hits (I am assuming this number will grow rapidly). Apparently, some believe the best way to frame the decision is to connect it to the Koch brothers, creating a compelling tale of a new plutocracy. (more…)

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If you see corruption in the upper tiers of government as a major problem for an economy’s health in the long run (and the balance of evidence suggests that it is, at least at high levels in capitalist countries), then externally imposed austerity might be the only way to root it out. Syracuse prof Glyn Morgan passes along this story from Spain:

Rato, Castellanos and others jointly own a commercial lot near Madrid that is leased to a third party, according to Ayala’s Jan. 10 statement to the court. They also controlled a company together while Rato, 64, was running Bankia, Ayala said.

At the same time, Lazard billed Bankia 9.2 million euros ($12 million) for work either assigned or executed during Rato’s 27-month tenure at the bank, court documents show.

Their relationship exemplifies how a network of leaders from the governing People’s Party helped their associates among the financial elite to profit while the country’s savings banks, known as cajas, racked up losses. That toxic combination flourished during the boom fueled by Spain’s entry into the euro in 1999 and served to deepen the crash that resulted in a 41 billion-euro bailout of Spanish lenders, according to Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.

Whether harsh spending cuts are a good idea or not for countries like Spain, Italy, and Greece depends in part on how one values the long run versus the short run. Also from the story:

“The things that we need to do to make Spain work require pulling the rug out from under the core interests of everyone” in power, Ken Dubin, a political scientist who teaches in Madrid at IE business school and Carlos III University, said in a May 22 telephone interview. “This is a political racket run for the benefit of politicians who suck the marrow out of the citizenry.”

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Last night the U.S. Senate played host to naked special-interest politics, as agricultural subsidy interests won vote after vote on the floor. As this story from Politico notes,

the sugar program stands out as one of the most intrusive of the commodity programs still on the books: a mix of price supports, import quotas, and since 2008, a feedstock program under which sugar can be purchased by the government to be used in biofuels.

The amendment Wednesday sought to end these purchases and roll back the price-support level from 18.75 cents per pound to 18 cents.

The amendment failed, 53-46. Some Republicans voted to keep the subsidies, including Marco Rubio of Florida. Even non-sugar-producing states’ senators voted to keep sugar subsidies:

And as a member of the Agriculture panel, Sen. Heidi Heitkamp (D-N.D.), warned her colleagues against unraveling the commodity coalition behind the farm bill.

“We forget that this is much bigger than a sugar program. It’s much bigger than any one single commodity,” said the North Dakota freshman, who hails from a state that is a major producer of sugar beets. “My concern is when you single out one commodity, whether it’s soybeans, corn or sugar or tobacco or rice, when you single out one commodity, you threaten the effectiveness of the overall farm bill.”

In other words, there’s a logroll among senators from subsidized states. My guess is that if you ran a logit model of votes on the sugar amendment, both sugar production and production of other subsidized commodities would enter the equation negatively. I wonder whether ideology or partisanship would factor in. I count 20 GOP “nays” (out of 45), meaning that a little over 60% of Democrats voted nay. And will Tea Party activists hold people like Rubio to account? I’m not holding my breath.

All 50 states ban the direct sales of motor vehicles from manufacturers to consumers. The politics of this regrettable policy are clear: auto dealers are powerful political players in every state, while only a few states actually have manufacturing facilities. Banning direct manufacturer sales benefits dealers while hurting manufacturers and consumers.

State governments continue to insert themselves into the contractual relationships between car manufacturers and dealers, typically to the ostensible benefit of the latter. The New Hampshire Senate recently passed a bill regulating the terms and conditions of dealer contracts with manufacturers, prohibiting manufacturers from requiring dealers to alter the appearance of their showrooms, for instance. (Disturbingly, the state director of Americans for Prosperity in New Hampshire supports the bill.) The bill is actually unlikely to change any “balance of power” between automakers and auto dealers. Automakers will simply respond by vetting potential dealerships far more closely and perhaps charging higher franchise fees. The onus of this response is likely to fall more on new dealerships than on incumbents. So the real losers from the bill are going to be potential entrants into the car dealer industry and, of course, consumers.

These are not the only examples of “state protectionism,” in which state governments adopt laws meant to reduce competition from out-of-state businesses for the benefit of local incumbents. Some states still prohibit certain out-of-state direct-to-consumer wine shipments. Regulatory barriers can accomplish the same ends. States have widely varying regulations on insurance products, making regulatory compliance a huge barrier for a company trying to market a standard policy in multiple states. For a long time, major life insurance companies lobbied Congress to adopt a national life insurance regulatory regime, pre-empting state laws. They were opposed by local life insurance agents, for whom knowledge of and compliance with distinctive state regulations were a significant source of competitive advantage. In the end, no national legislation materialized, but Congress authorized the formation of an interstate compact, essentially a contract among consenting states that sets up a single insurance regulator. More than 40 states have joined the Interstate Insurance Product Regulation Commission, which regulates life insurance and annuities.

Such state protectionism potentially runs afoul of the so-called “dormant commerce clause” of the U.S. Constitution. The commerce clause allows Congress to regulate trade among the several states. By implication, then, states are presumptively prohibited from burdening interstate trade, unless authorized by Congress. Unfortunately, courts have been reluctant to scrutinize state economic regulations that have an essentially protectionist character, although especially blatant discrimination against out-of-state imports has been overturned. (more…)

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I agree with pretty much everything Marc has to say on the deal below. (For my own thoughts, see here.) Nevertheless, from a political point of view, something very like this deal was inevitable.

First, the Republicans held a bad hand. All the Bush tax cuts were going away, so they had very little leverage. The only leverage they had was over letting unemployment benefits, stimulus tax credits, and corporate welfare expire, and letting the sequester take effect immediately. However, Republicans are scarcely fonder of the sequester than are Democrats, both because of its cuts to defense and because of the blunt, across-the-board nature of the domestic discretionary cuts. As soon as the negotiations turned to dealing with taxation and spending separately, Republicans were never going to get significant spending cuts out of a taxation deal, because they had very little to offer Democrats on taxation. In the end, Republicans got a higher income threshold for tax increases, but paid for it with extensions of the foregoing expenditure programs.

Why were Republicans not willing to give a little more on tax increases on the rich in exchange for cuts in tax expenditures? Here the optics play a role. Pushing hard to let the low-income and higher ed tax credits expire could easily be demagogued. Letting extended unemployment benefits expire when Republicans continue to insist that the economy is weak would also be jarring. On the corporate welfare side, the diffuse-costs, concentrated-benefits logic applies in full force. Besides people who read sites like this one and the concentrated interests who benefit from such programs and spend literally hundreds of millions of dollars a session lobbying for them, no one cares about corporate welfare, and many even think of it as “pro-business” (as I’ve read journalists oh-so-neutrally describe them in articles on the deal) and therefore somehow pro-recovery.

Now, if this analysis is correct, then in two months when the spending side of the fiscal cliff is dealt with, Democrats will hold a similarly weak hand, and we should look for essentially zero Republican concessions on taxes. If the outcome deviates from this prediction in either direction, then we will have good reason to think that extraneous factors, such as “negotiation skills,” played some kind of role.(*) But I would look for the Nash Equilibrium to obtain.

(*) Another possibility, of course, is that I misread the (House) GOP’s preferences. They may hate defense spending cuts so much that they are willing to allow more tax increases to prevent them. That would, of course, be a perfectly awful outcome from a limited-government perspective — and therefore very much within the realm of possibility.

Harrison Amukoyi’s farm is perched on a hillside in western Kenya. On less than two acres of land, he raises several crops and a dairy cow. To sell milk, Harrison and his neighbors must compete with industrialized countries that dump their subsidized milk on local markets, depressing prices for Kenyan farmers. This unfair contest appears in countless guises throughout the developing world, intensifying conditions of poverty.

And here are some figures from the NCPA analysis on how poor farmers would benefit if cotton subsidies alone were eliminated:

The International Cotton Advisory Committee (ICAC) estimates that ending U.S. cotton subsidies would raise world prices by 26 percent, or 11 cents per pound. The results for African countries dependent on cotton exports would be substantial:

Burkina Faso would gain $28 million in export revenues

Benin would gain $33 million in export revenues

Mali would gain $43 million in export revenues.

We have seen reductions in severe poverty recently. The world’s biggest reduction in severe poverty has come in China over the last three decades. It’s clear that economic reform is the critical, long-term driver of poverty reductions. But where did China’s poverty reductions start? With growing agricultural productivity. The poorest countries of the world can’t just move straight into manufacturing. They need first to generate some agricultural surplus. Making it possible for poor farmers to sell to rich consumers, or even to their own people, is necessary to making that happen.

Removing rich-country agricultural subsidies could also have political-economy benefits. Many LDCs repress their agricultural markets in favor of the urban sector. Thus, their own governments deserve some share of the blame. The typical tool for this repression is a “marketing board” monopsony. The marketing board buys produce at coercively depressed prices and then tries to export it for a profit, plowing the proceeds back into urban subsidies. Rising world prices for farm goods would increase the profits of these marketing boards, potentially allowing them to raise the prices they pay farmers at home. While some nasty governments might find the new revenue reinforces their power, the new revenues would surely build useful state capacity in just as many places. Furthermore, rising farm incomes should increase the political power of the farm bloc in LDCs, which increases the probability of domestic liberalization.

Ending the rich world’s harmful policies would not eliminate global poverty. However, it would make a significant dent and could set in motion economic and political processes that would have far-reaching effects indeed.

Still, agricultural subsidies and trade barriers survive, amounting to well over $300 billion per year in the rich countries of the OECD, dwarfing the aid sent from rich to poor countries. They survive because of the collective-action problem: poor people have no voice at all in the political systems of the rich world, and rich-world consumers barely have one. Producers organize effectively because of the clear benefits they receive from subsidies, and even ideological opposition from both the left and the right cannot effectively fight them.

The only effective way to counter the greed of the few is with the white-hot moral passion of the many. (more…)

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